UPDATE 2-Finnish refiner Neste's dividend cut and outlook sends shares lower

* Warns of higher costs for renewables business

* Looming maintenance to hit profit

* Dividend cut to 0.80 eur vs forecast 0.96 eur

* Shares fall 8% (Adds detail, analyst, shares)

Feb 5 (Reuters) - Finnish biofuel producer and oil refiner Neste reported a smaller than expected decline in fourth-quarter profit on Friday, but a dividend cut and a warning on challenges facing its key renewables business sent its shares down 8%.

Neste said the first-quarter sales margin at its renewables unit, which generated 94% of the group profit in 2020, would fall from the previous quarter, citing high input costs.

“Waste and residue markets are anticipated to remain tight as demand continues to be robust,” the company said.

Maintenance works, meanwhile, will deliver a hit of about 270 million euros ($323.4 million) to 2021 profit, it said, with about half of that attributable to a 12-week turnaround at its Porvoo refinery.

“There is high turnaround activity planned in 2021 at all of Neste’s renewable products facilities,” Citi analysts said.

Neste, which has invested heavily in renewables, said its October-December comparable operating profit fell to 380 million euros ($455 million), beating the 365.3 million expected on average by analysts, Refinitiv Eikon data showed.

Quarterly revenue fell to 3 billion euros from 4.1 billion euros a year earlier, with lower crude oil prices accounting for 700 million euros of the decline.

Neste’s board proposed to cut the dividend to 0.80 euros per share for 2020, against 1.02 euros for 2019 and a consensus analysts forecast of 0.96 euros.

The first-quarter outlook was weak and the dividend cut unexpected, Jefferies analysts said in a note. ($1 = 0.8349 euros) (Reporting by Tarmo Virki in Tallinn Editing by David Goodman)